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News and Sectoral Comovement

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Abstract

This paper tests the existence of strategic information complementarities as a source of sectoral comovement. A theoretical model derived in Veldkamp and Wolfers (2007) explains sectoral comovement by the assumption that firms rely too much on aggregate information to make output decisions. We find empirical support for this hypothesis: news on aggregate developments, on average, affect firms production plans significantly more than news on sector-specific developments. This result is based on a rich dataset on firm survey and media releases for Germany comprising 01/1999-07/2006.

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Bibliographic Info

Paper provided by KOF Swiss Economic Institute, ETH Zurich in its series KOF Working papers with number 07-183.

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Length: 32 pages
Date of creation: Dec 2007
Date of revision:
Handle: RePEc:kof:wpskof:07-183

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Keywords: Media reporting; news; expectation driven business cycles; information com- plementarities; sectoral comovement.;

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References

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  1. S. Rebelo., 2010. "Real Business Cycle Models: Past, Present, and Future," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 10.
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  7. Schröder, Michael & Hüfner, Felix P., 2002. "Forecasting economic activity in Germany: how useful are sentiment indicators?," ZEW Discussion Papers 02-56, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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  13. Cooper, Russell & Haltiwanger, John, 1996. "Evidence on Macroeconomic Complementarities," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 78-93, February.
  14. Schmitt-Grohe, Stephanie, 1997. "Comparing Four Models of Aggregate Fluctuations due to Self-Fulfilling Expectations," Journal of Economic Theory, Elsevier, Elsevier, vol. 72(1), pages 96-147, January.
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Cited by:
  1. Beaudry, Paul & Portier, Franck, 2013. "News Driven Business Cycles: Insights and Challenges," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9624, C.E.P.R. Discussion Papers.
  2. Lena Dräger, 2010. "Why don't people pay attention? Endogenous Sticky Information in a DSGE Model," KOF Working papers, KOF Swiss Economic Institute, ETH Zurich 10-260, KOF Swiss Economic Institute, ETH Zurich.

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